When Non-HR Executives Ask About Turnover…

October 10, 2023
Richard Finnegan
Articles

Here’s the scene: You are sitting in a top management meeting when “turnover” comes up, and all eyes become focused on your eyes. The forever-assumption has been that HR is about people and turnover is about people too, so HR should therefore solve turnover. So what should you say?

Treat Employee Retention Just as You Treat Sales and Service

In 2015 I authored a book named HR’s Greatest Challenge, published by SHRM, where at the end I listed my 30 favorite quotes…which was my way to saying if you don’t want to read every page, here are the headlines. I’ve written five books and this one might be the best. So this edition of Targeting Turnover and a few editions that follow will feature some of those quotes and the depth behind them. Today I’ll present six quotes regarding executives’ roles in reducing turnover…and therefore what you should say in that next executive meeting when all turnover-inquiring eyes are upon you.

Quote #1: How do you manage sales and service? Convert outcomes to dollars, establish goals, and then provide tools, solicit forecasts, and apply accountability. Manage engagement and retention just like sales and service.

Very unfortunately, somewhere along the way executives decided that managers should be accountable for selling to their customers and retaining their customers, but not for retaining their employees. An easy comparison is salespeople can lose a sale because of a competitor’s better product, or better pricing, or the CEO bought the product from her son-in-law instead. And your salesperson gets dinged if they fail to make their sales goals, no matter the reason why. Yet when an employee quits, HR takes the blame.

This quote says to treat employee retention just as you treat sales and service by applying the same business-driven tools. Executives are accustomed to goals and accountabilities, so those words fit their language.

Use Internal Employee Retention Benchmarks, Not Competitors

Quote #2: The best benchmarks are internal. Tell your CEO your turnover is better than your peers’ turnover and she will be happy. Tell your CEO how much your turnover costs and she’ll never ask about your peers’ turnover rates.

Comparing your turnover rates to your peer companies’ turnover rates pushes the door wide open to doing nothing. If you are worse, then “we have to do better”. If you are better, then “we’re doing good”. If you are performing slightly better than your peers, the implication is you are doing the best you can. Or said another way, your retention ceiling is being just one hair better than mediocre.

Most CEOs believe retention is mostly about pay. So they are delighted when your turnover beats your peers’ turnover because then they can save money. And if your turnover is worse than your peers, the worst outcome is HR will be asked to form a retention committee and have more social events. The same outcomes happen when comparing engagement survey results to “benchmarks”, as doing OK often means we don’t have to do anything.

Convert Employee Retention Percentages to Dollars

Quote #3: The first step to making engagement and retention first-tier metrics is to convert survey scores and turnover percentages to the CEO language, which is dollars.

This is low-hanging fruit except most HR executives don’t know how to do it. Converting turnover to dollars eliminates any discussion about benchmarks because the cost is still the cost. Most important is that finance participates in the study and also that finance announces the results…raising to a level of credibility that legitimate action at the top suddenly appears. Using the usual “two-times-annual-pay” formulas will never fly with finance so here’s a better way.

Want to convert your turnover percentage to a dollar cost?
Use our Free Turnover Cost Calculator.

Lost-Dollar Awareness for Every Instance of Turnover

Quote #4: CFOs’ jobs are to find coins in the couch, and they sleep with notepads on their nightstands. If CFOs learned the real cost of turnover and disengagement, all companies would be managed better.

Several years ago I asked the CFO of an aerospace company to join us in placing a cost on turnover. Later that day we agreed that losing an engineer cost his company $121,450. As he became more interested in this new idea, we pondered together where his annual cost of turnover compared to other costs for facilities, materials, and other major debits. The next day he called to say that he couldn’t sleep so he went to work early to extrapolate some numbers, leading to the conclusion that turnover was his second-highest annual cost.

How much more engaged would your top team be in real retention solutions if your CFO brought this level of lost-dollar awareness to the management team?

Employee Retention Relies on Building Trust

Quote #5: If you can think of one manager who can’t build trust with his team, cancel all other efforts to improve engagement and retention until you fix this problem.

Now it get dicey because executives need to learn that the #1 reason employees stay or leave is how much they trust their boss. Tracking turnover for first-line leaders and reporting it to the executive team is essential, even if you must track it by hand.

I outline more on this in my book titled HR’s Greatest Challenge which provides summaries of 25 studies that back this up.

Manage Employee Retention as a Top-5 Metric

Quote #6: Asking your executive team to manage engagement and retention as a top-5 metric requires courage—as does asking them to hold themselves and other leaders accountable.

If you are reading this piece as an HR executive, the first responsibility to make this massive retention-approach happen is on your shoulders…and this requires drumming up your own personal courage. But the tools to do so are included here, and the progress you make will become your greatest contribution, your greatest legacy to your organization.